Is the BetaShares Australia 200 ETF (ASX:A200) the best ASX exchange-traded fund (ETF) to own for exposure to ASX shares?
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What is the BetaShares Australia 200 ETF about?
As the name may suggest, it aims to give investors exposure to the ASX 200. That represents 200 of the biggest businesses on the ASX.
This ETF is provided by BetaShares, one of the biggest ETF providers in Australia. It offers other popular ETFs like Betashares Nasdaq 100 ETF (ASX: NDQ) and BetaShares Global Sustainability Leaders ETF (ASX: ETHI).
What shares does it own?
The BetaShares Australia 200 ETF is designed to track the ASX 200, so it gives investors the biggest exposure to Australia’s blue chips, and some smaller ones. The bigger the business, the more the ETF will own of that business because it’s just tracking the ASX 200.
Its biggest 10 positions were: CSL Limited (ASX: CSL), Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ), Wesfarmers Ltd (ASX: WES), Woolworths Group Ltd (ASX: WOW), Macquarie Group Ltd (ASX: MQG) and Transurban Group (ASX: TCL).
In terms of the sector allocation, you’re getting a big allocation to just two sectors. There’s a 26.2% allocation to financials and a 20% allocation to materials. Healthcare is the only other sector with an allocation of more than 10% (largely thanks to the CSL investment).
How much is the annual management fee?
The lower the annual management cost the better it is for investors’ net returns. This is helpful for building long-term wealth.
This ETF has an annual management fee of just 0.07% per annum. That’s one of the cheapest available to investors on the ASX.
Is it the best ETF for ASX shares?
This ETF is certainly the cheapest for Aussie investors. So if you just want to invest in the broad ‘Australian share market’ then this could be the best option.
However, for me it’s certainly not the best investment option around. That’s nothing against BetaShares, I’m just not a fan of most of the biggest holdings of this ETF.
I think CSL is a great business. Macquarie is pretty good too. But the rest of the larger businesses don’t excite me.
They offer very limited earnings growth over the next few years with the economic impacts of COVID-19. They are also at the peak of the market share because they already dominate in Australia (and New Zealand).
Compare this ETF to a global one like Vanguard Msci Index International Shares ETF (ASX: VGS) where there are much higher quality businesses that make up the largest positions like Apple, Microsoft, Alphabet and Amazon. I don’t think the ASX can compare, in terms of growth and diversification, to the global share market.
The initial dividend (in normal times) of the BetaShares Australia 200 ETF may be high, but it doesn’t offer much growth. Indeed, since inception in May 2018 the BetaShares Australia 200 ETF has only returned an average of 2.08% per annum, which includes the distributions.
I think there are other ETFs that invest in ASX shares such as BetaShares Australian Ex-20 Portfolio Diversifier ETF (ASX: EX20) and BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC) which are better in my opinion.
However, there are also plenty of other ASX shares that offer diversified investments that I’d prefer to buy like WAM Leaders Ltd (ASX: WLE), Brickworks Limited (ASX: BKW) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). In my opinion, these ASX shares would be better dividend ideas than the overall BetaShares Australia 200 ETF. I think the bank exposure brings down the long-term potential of the ETF.
I think the BetaShares Australia 200 ETF isn’t a terrible option for investing, I just think that the largest underlying holdings are going to be disappointing in the next few years.
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Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS and CSL Ltd. The Motley Fool Australia owns shares of and has recommended Brickworks, Macquarie Group Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Transurban Group and Wesfarmers Limited. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS and Vanguard MSCI Index International Shares ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.